Miners Sing the Siren Song…
Lower lows and lower highs are setting in. BTC might be heading to the place where it all began, the $4,000 – $5,000 range. The reason for Bitcoin’s current trajectory could be attributed to the miners – the ones who form the backbone of the network.
Bitcoin works like an orchestra; the difficulty, the price, the hash rate, they are all interconnected and need to be in sync with each other. If the price of Bitcoin no longer incentivizes miners, that is when some miners tend to give up the not-so-pocket-friendly process of mining, with the risk of them even selling their BTC. This disrupts the harmony of Bitcoin and could spell disaster.
Miners are obviously an important part of the BTC ecosystem. If BTC isn’t priced at a level where miners can’t reap profits or break-even, they resort to selling their BTC holdings. That may be what we are witnessing right now.
CIO of Atlanta Digital Currency Fund, Alistair Milne, stated a few weeks ago that miners were capitulating. His basis for the statement was a 7% drop in Bitcoin’s difficulty.
Bitcoin mining difficulty dropped the most since Dec 2018 after the last adjustment on 8th Nov 2019 (-7%)
… seems to confirm the cost of mining (on average) is ~$8000 https://t.co/vKiJgaxzZh
— Alistair Milne (@alistairmilne) November 11, 2019
Since then, Bitcoin’s price has shed 11% of its value and by the looks of it, BTC may not stop anytime soon.
A partner at Adaptive Fund with the screen name “Willy Woo” on Twitter stated that Bitcoin had never gone into its halving with bearish price action, adding that the fundamentals are different this time around.
“Historically we front run with a BULLISH setup, miner capitulating only after halvening when revenues are slashed. This is a unique setup. Quite bearish leading up to the event.”
The reason why miners could be “capitulating” or selling off their BTCs can be attributed to…